The relatives of Australians killed in the Bali bombings today condemned the Indonesian supreme court’s decision to clear the Muslim cleric Abu Bakar Bashir of any involvement in the 2002 attack.

He was released from a Jakarta prison in June after serving nearly 26 months of a two-and-a-half year sentence for terrorist conspiracy charges. The court’s ruling prompted a nationwide outpouring of anger in Australia, where the emotional wounds of the Bali terrorist attack have yet to heal. The bombing killed 202 people, including 88 Australians.

Mark Stuart, who lost his son in the bombings, said the whole world knew that Mr Bashir was responsible. “He’s going to kill more people without even thinking,” he said. Brian Deegan, whose son Josh was killed in the blast, said he had lost faith in the justice system in Indonesia. “This is simply part of the overall nightmare that has been set in place and continuing since October 12 2002,” he told an ABC radio interviewer.

Mr Bashir spoke to journalists at his hardline Islamic boarding school in the central Javanese town of Solo, praising the court ruling as an act of defiance against the US. Many countries and courts "are too afraid to stand up to the United States, but the supreme court decision is honest and brave," he said, adding that he was considering filing a lawsuit to rehabilitate his name and seek damages.

Australian leaders from both sides of the political divide also admitted they were upset about the ruling but said they were powerless to intervene. The prime minister, John Howard, said he felt deeply for the victims’ families, but had to accept the Indonesian court’s decision. “It is the court system of another country and we can’t change that,” he said. “But it doesn’t stop us feeling upset and I know there will be a feeling of anger on the part of the parents and the loved ones and I am feeling for them this morning very much.”

The opposition Labor leader, Kevin Rudd, said he could understand relatives’ concern and outrage. “We are deeply concerned about how this will affect them and their ability to recover from that terrible event,” he added.

But he also called on Mr Howard to urge the Americans to release Hambali, the man widely believed to be the mastermind of the Bali bombings, to the Indonesian authorities. The absence of Hambali, who is in custody in Guantánamo Bay, weakened the case in the courts which the Indonesians could mount, Mr Rudd said.